A. Assume you are the manager for the corporate loan division of RTY Bank Limited. Currently,...
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A. Assume you are the manager for the corporate loan division of RTY Bank Limited. Currently, RTY is holding following two loans: Loan Cost of Expected Loan rate Annual fees fund default frequency P12 (1) Dream Corporation 4.00% 9.00% 1.50% 4.00% -0.10 (2) Magneto Corporation 2.50% 5.50% 1.15% 1.50% The return on the loan given to Dream Corporation is 5.25%, the risk on the loan given to Magneto Corporation is 1.85%, and the return of the loan portfolio is 4.67%. RTY does not believe that these loans could be sold in the market. Requirements (show the detailed calculation steps): (i) (ii) (!!!) Calculate the loss given default on loans given to Dream Corporation and Magneto Corporation [2 marks] Calculate the proportions of loans given to Dream Corporation and Magneto Corporation in the portfolio [3 marks] Calculate the risk of the portfolio [2 marks] A. Assume you are the manager for the corporate loan division of RTY Bank Limited. Currently, RTY is holding following two loans: Loan Cost of Expected Loan rate Annual fees fund default frequency P12 (1) Dream Corporation 4.00% 9.00% 1.50% 4.00% -0.10 (2) Magneto Corporation 2.50% 5.50% 1.15% 1.50% The return on the loan given to Dream Corporation is 5.25%, the risk on the loan given to Magneto Corporation is 1.85%, and the return of the loan portfolio is 4.67%. RTY does not believe that these loans could be sold in the market. Requirements (show the detailed calculation steps): (i) (ii) (!!!) Calculate the loss given default on loans given to Dream Corporation and Magneto Corporation [2 marks] Calculate the proportions of loans given to Dream Corporation and Magneto Corporation in the portfolio [3 marks] Calculate the risk of the portfolio [2 marks]
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